People & Skills
Risk Aversion in Public Sector Procurement – Part 3

Recently, we wrote about the issue of risk and in particular the risk averse attitude that many public sector procurement staff still appear to hold. The topic was discussed at our Public Spend Forum Exchange kick-off meeting recently, where leaders from different parts of the UK public sector came together to talk about some of the key issues facing public procurement.

Then we gave some thoughts on why this is an issue. We also had a very interesting contribution to the debate from Dan Warnock, a current practitioner, who explained from the front line just why contracting authorities and professionals tend to take the risk averse route.

So we promised in our last article to take a look at how these attitudes might be addressed. On reflection, we came up with four areas that might be tackled if we really want public procurement to become less risk averse, more commercial and innovative in how professionals go about their jobs. We intended to cover all four in this article, but on reflection we have split it into two, because our first point is so important and more space to itself.

The four areas are regulations, incentives, culture and training / knowledge. It is the last of those that we will focus on today.

The more we consider this issue, the more it strikes us that knowledge, education and training are at the heart of the issue. That’s because it is no use simply saying “we must be less risk averse” without having a clear framework of how to do that, and then making sure the right people have the skills to implement the desired actions.

For example, there is no point saying “right, we will be creative, take some risks, let’s not bother advertising that requirement” or perhaps “let’s just re-negotiate and extend that contract” if such steps are clearly illegal in terms of EU directives or indeed break local regulations.

What we need is people who know and understand the rules and constraints well, but know how to apply innovation and yes, at times take some calculated risks, but all within the policy and regulatory  framework. The best people in public procurement know how to do this, but it is not easy.

So the first task is that we must ensure people really understand the rules, but that is of course not enough. That added dimension around working creatively within the rules is what is also needed. As Dan Warnock said in his article,  I’m inundated with invitations to courses on the Regulations and their recent developments, but nothing on “how to be more commercial”.

Our point is that we need both skills, and ideally both brought together into the same programme. So it should not be two separate training programmes or events, but one that says “these are the regulations, and here are some tools, techniques and ideas to help you be more effective, more innovative, and take a few risks whilst being mindful of those rules”.

As we said above, the best people and organisations work in this way. So if they think about an issue like how local businesses might be able to win more of their contracts, they don’t just shake their heads and say “it’s too difficult”. Rather, they look at the regulations on social value, and see how that might play into the process, or they think about what evaluation factors might be both reasonable and favour local firms (“how responsive will you be if we have an emergency?”). They might also look at initiatives that sit outside a specific procurement, such as running workshops to help local or smaller firms bid more professionally.

The ability to negotiate is another interesting area. Some procurement people will just say “we can’t negotiate once tenders are submitted”. Others will point out that clarification of tenders is allowable, as long as we abide by the fundamental principles of fairness and equal treatment. So let’s make sure we approach all the tenderers in the same way, and ask similar clarification questions. That might just lead to a bit of what looks a little bit like negotiation – and ends up with a better deal for the public purse – but is not in breach of the regulatory principles.

So this looks like an opportunity. A new type of training that is based around the regulations, but approaches them in a commercial and innovative spirit to help buyers understand what absolutely can’t be done, what can be done (with some care and skill), and where the inevitable grey areas lie. We suspect this is a topic we will come back to again – and maybe we’ll start writing some training material!